Business and Contracts Talk: October 2011

Monday, October 31, 2011

New laws create opportunities, improve workplace

Editor's note: This is the second in a series of columns on employment law.)

Employment law today is what guides, directs and regulates the workplace environment.

Many core employment values and laws were developed as a result of the civil rights movement. The EEOC, Equal Employment Opportunity Commission, is just one federal agency that oversees employment law in every state. Its website is a wealth of information for both the employer and the employee (www.eeoc.gov). Another great website is www.dol.gov (Department of Labor).

Most companies of any substantial size have a human resource department that helps to interpret the laws and gives professional direction to the leadership within the company.

When a company does not have a union — the company generally creates and develops a company handbook that includes policies for employees based on employment laws. Handbooks are distributed on the employee's first day of employment, and should show a commitment to fair, equitable and respectful practices. The company is expected to administer policies exactly the same to all employees.

Handbook policies will cover areas that are good common sense, provide boundaries for employees and a system which encourages an open door policy. The open door policy is the alternative to labor organization. The management encourages all employees to communicate with any level of leadership to discuss concerns, offer feedback or to ask questions.

Many hourly employees and leadership professionals prefer the great advantage in communicating directly with employees to resolve challenges or to make changes. Union organizing may have played an important role before the civil rights movement, but the role of the union has diminished greatly with the creation of so many federal laws.

Companies are now obligated and required to conduct business based on today's laws. There can be harsh penalties, fines and many legal costs involved for any company that does not respect the law.

» Fair Labor Standard Act: Administered by the Department of Labor, Wage and Hour Division. Prescribes standards for minimum wages and overtime pay. Additionally, develops and administers standards to determine exempt employees vs non-exempt employees (salaried vs. hourly).

» Family Medical Leave Act: Administered by the Department of Labor, Wage and hour Division. The law requires employers to give up to 12 weeks of unpaid, job-protected leave to eligible employees for the birth or adoption of a child, serious illness of the employee, spouse, child or parent. Twenty-four weeks of unpaid time related to care of a military family member.

The employee must complete a request for FMLA and submit a medical certification from a health care provider before the company is obligated to grant the time off. The leave may be taken as a leave of absence for up to 12 weeks continuously or may be taken in increments as small as one hour at a time. The FMLA helps the employee to have job protection while meeting personal demands. Additional qualifiers are size of employer and length of employment.

» Health Insurance Portability and Accountability Act (HIPPA): Privacy laws administered by the Department of Health and Human Services, related to personal health information. Information is required to be kept private and secured. The employer is prohibited from discussing an employee's medical condition. The supervisor must accept "illness" as a reason for time away from work and is prohibited from asking for additional detail.

» Immigration Reform and Control Act (IRCA): Immigration (Homeland Security) laws ensure that immigrants may be employed in the United States; however, it also requires that employers hire only persons who may legally work in the US. The employer must verify the identity and employment eligibility of anyone to be hired, which includes completing the Employment Eligibility Verification Form (I-9). This form must be completed in full by day three of employment. Fines can be up to $10,000 each for incomplete or missing I-9 forms.

» Pregnancy Discrimination Act: An amendment to Title VII. Discrimination on the basis of pregnancy, childbirth, or related medical conditions constitutes unlawful sex discrimination. Women who are pregnant or affected by related conditions must be treated in the same manner as other applicants or employees with similar abilities or limitations.

Although employment law has become more complicated over the years, employees everywhere have benefited by the great opportunities created and improvements to the workplace.

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Friday, October 28, 2011

Good-bye to never-used tax withholding law

A never-used U.S. tax withholding mandate should be repealed both the White House and Republicans in Congress have said.

The 2005 law, the Tax Increase Prevention and Reconciliation Act, was intended to partly offset the cost of tax cuts, Business Law Daily reported Thursday. It required the government to withhold 3 percent of the payment on government contracts as a safety net against potentially unpaid taxes.

Rep. James Lankford, R-Okla., said, "We should not have a national policy that assumes every contractor in America is a tax cheat."

The bill to repeal the law has 269 co-sponsors and support from the White House. It was introduced by Rep. Wally Herger, R-Calif., who said, "Full repeal of 3 percent withholding will help create a favorable environment for job creation and is necessary to provide certainty to our small businesses that this harmful provision will be eliminated once and for all."

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Thursday, October 27, 2011

In Congress, jobs now trump a hunt for tax cheats

Alan Fram, Associated Press

Congress and President Barack Obama want to scrap a law aimed at pressuring scofflaw government contractors to pay their back taxes, but it's not because the problem has gone away.

On the contrary, government investigators in the past few months have reported that thousands of federal contractors owe hundreds of millions of dollars in overdue taxes, including some who are working for the Internal Revenue Service itself.

The move to repeal the law shows lawmakers' eagerness to show they are trying to protect jobs — and a national mood of getting government off people's backs. It also underscores the potency of a lobbying campaign to sink the statute by foes ranging from the aerospace industry to female construction company owners.

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Wednesday, October 26, 2011

California's unemployment insurance fund debt growth

The state has borrowed $11 billion from the federal government in recent years to pay jobless benefits, requiring hundreds of millions of dollars in interest payments to service its debt.

By Marc Lifsher, Los Angeles Times

Reporting from Sacramento—

California has borrowed $11 billion from the federal government in recent years to prop up its insolvent unemployment insurance fund. The loans kept benefits flowing to millions of laid-off workers, but now the bill is coming due.

The state recently sent $303.6 million to Washington, the first of what could be many years of interest payments required to service its debt to Uncle Sam. It will have to pony up at least a half-billion dollars in 2012 and even more in coming years. The state, which already is struggling to close a massive budget deficit, probably will be forced to make even deeper cuts to schools, law enforcement and other basic services.

In the meantime, California employers in January will be hit with a mandatory surcharge of about $25 per employee to begin paying down the principal on the federal loan.

California operates one of the nation's most expensive unemployment insurance systems. But the taxes needed to fund it, 100% of which are paid by employers, aren't sufficient to support the system.

Although jobless benefits are about the same as the national average, costs have exploded because so many Californians have lost their jobs and been unable to find new ones quickly. California's September unemployment rate of 11.9% is the second highest in the nation, behind only Nevada at 13.4%. About 2 million Californians are unemployed; a third of them have been out of work for a year or more.

Other states are struggling as well. Thirty-four states have borrowed $39 billion to pay unemployment benefits that have mounted during the worst downturn since the Great Depression of the 1930s.

Still, experts say California's system is fundamentally out of balance and in need of a major overhaul to return it to solvency.

"Do you raise taxes even more, cut benefits or some combination?" said Joseph Henchman, vice president of the Tax Foundation, a nonpartisan Washington think tank. "Eventually you run out of gimmicks … borrowing, bonds, moving the payroll into next year … and you pay the piper."

Unemployment insurance is a joint federal-state government program that began in 1935 to help people during the height of the Depression. In most states, the federal government charges employers an annual base rate of 0.6% on the first $7,000 of each employee's wages, and sets minimum benefits levels that must be paid to jobless workers.

States are responsible for administering the program. They can establish benefit levels more generous than the federal minimum; most require employers to collect taxes on a higher threshold of workers' wages to pay for them. California, however, does not. It is one of just six states where employers pay unemployment insurance taxes on only the first $7,000 of a worker's annual income.

Federal loans are available when states run short of tax money to pay benefits. Uncle Sam automatically raises employers' tax rates if states can't repay. A 0.3% hike, known as a surcharge, will take effect in January.

That will be tough on many struggling businesses in a down economy. So President Obama is proposing a compromise: The federal government would grant a two-year suspension of state interest payments and employer tax surcharges. After that, the wage threshold to calculate unemployment insurance taxes would be boosted to a minimum of $15,000. The change would cost California employers an estimated $13 billion between 2012 and 2018, according to the Legislative Analyst's Office.

California's state unemployment insurance program provides a maximum of 26 weeks of benefits of up to $450 a week. Congress approved 10 extensions that added as much as 73 weeks of additional benefits to some long-term unemployed workers, depending on the severity of an individual state's jobless situation. Those programs are set to expire at the end of the year unless renewed, ending benefits for about 1.8 million people nationwide, including 305,400 in California, according to the National Employment Law Project, an advocacy group for low-wage and unemployed workers.

It's unclear whether Washington lawmakers will approve another extension despite the anemic labor market, or how hard they will push measures that force states to deal with their deficits.

In the absence of federal action, some states are moving to close the gap on their own. Six states — Arkansas, Florida, Illinois, Michigan, Missouri and South Carolina — have reduced the number of weeks of state eligibility below the once-universal 26 weeks. Florida, Rhode Island and South Carolina have made it tougher to qualify for benefits.

In California, labor unions and advocates for the unemployed and working poor already are pressuring the administration of Gov. Jerry Brown to raise employer taxes.

"We've got to face the reality of our underfunded unemployment system. It is simply unsustainable," said Angie Wei, a lobbyist for the California Labor Federation. "There is simply no feasible solution but to raise employer taxes above the bare federal minimum."

Republican legislators and the business community disagree.

"The best way to fix the unemployment insurance fund problem is to put Californians back to work," said Senate Minority Leader Bob Dutton (R-Rancho Cucamonga). The governor and Democratsshould join Republicans in the more general task of fixing the state's allegedly unfriendly business climate, he said.

Previous efforts to fix California's broken unemployment insurance system have proved futile. Business lobbyists blame much of the problem on a decade-old law that increased weekly checks to their current levels. So far, no one is clamoring to reduce benefits in California. But raising unemployment insurance costs definitely remains a non-starter for the California Chamber of Commerce, policy advocate Marti Fisher said.

"Any additional taxes on employers," she said, "are going to be counterproductive for job creation and stabilizing the economy."

For more information on these matters, please call our office 305 548 5020.

Tuesday, October 25, 2011

Stratman defense will cite special privilege

By ANNE JUNGEN

Trisha Stratman's attorney intends to argue at her trial next month the former sheriff's deputy should be acquitted of vehicular homicide because she had a special right under state law.

In a motion filed Friday, her attorney argues Stratman was acting in good faith in an official capacity on July 18, 2010, when the La Crosse County sheriff's deputy was involved in a fatal crash with a 16-year-old driver.

That makes her conduct privileged, her attorney argues.

Stratman is charged with homicide by negligent operation of a vehicle. A jury must determine whether Stratman was criminally negligent, as prosecutors contend.

Prosecutors have filed motions asking the court to prohibit the privilege defense.

Attorneys on Friday also filed motions to exclude certain evidence and testimony from the trial Nov. 7 in La Crosse County Circuit Court.

A judge will rule on the motions during a hearing Thursday.

Prosecutors contend Stratman ran a red light at about 90 mph at Hwys. 35 and OT and hit a car driven by Brandon Jennings about 1 a.m., according to court records. The 16-year-old Holmen High School student from Onalaska died after being thrown from the car.

Stratman was responding to an emergency call from a Holmen police officer handling a rowdy bar crowd alone. Her car's lights and sirens were activated.

She was fired in August and has appealed her termination.

For more information on these matters, please call our office at 305 548 5020.

Environmental Law and Policy Center: New study finds 171 wind power companies and 135 solar energy companies working in Wisconsin

The Environmental Law and Policy Center's new study of Wisconsin's solar and wind energy supply chain finds that 171 Wisconsin companies are part of the wind energy supply chain and 135 Wisconsin companies are part of the solar energy supply chain.

The solar and wind industries provide over 12,000 jobs in Wisconsin. This job growth has been supported for years by utility incentives and state policies like Wisconsin's Renewable Portfolio Standard and Focus on Energy Program. However, Wisconsin's recent political and policy shifts have undermined clean energy development and job creation.

"Wind and solar energy development have created new jobs and business growth that Wisconsin needs," said Howard Learner, Executive Director of the Environmental Law & Policy Center. "With over 250 local companies ready to grow, Wisconsin's leaders should be looking for ways to advance public policies that encourage renewable energy development and progress in the state."

ELPC surveyed businesses statewide to identify Wisconsin companies that are actively participating in the renewable energy supply chain. The list includes steelmakers, electrical component manufacturers, engineering firms and other longstanding businesses that are profiting from renewable energy development, as well as start-ups and small businesses developing cutting edge clean energy technology. For example:

Caleffi sells solar thermal systems and components from its Milwaukee office. "Solar is a real job creator in Wisconsin and across the United States and one of the biggest generators of growth for Caleffi," said Rex Gillespie Caleffi's Director of Marketing.

Oshkosh-based wind manufacturing company Renewegy builds and installs light commercial wind turbines. The company plans to add 50 new employees in the coming years. "Not only do we manufacture and employ workers here in Oshkosh, but 90 percent of our components are sourced from Midwestern partners," said Dana Enz, Renewegy's VP of Sales. "As we grow, they grow."

Smart state and local policies can make a big difference in creating economic development and new jobs for the solar and wind sector. Helios recently opened Wisconsin's first solar panel manufacturing plant in Milwaukee. Low-interest loans provided by the state and the City of Milwaukee convinced Helios to locate in Wisconsin. "The Midwest is getting close to becoming a real solar hotspot," said Helios' General Manager Brent Brucker. "A little more foresight on the part of a state legislatures and this region could really take off."

As part of its effort to promote economic growth and environmental progress through clean energy development, ELPC has also completed wind and solar supply chain studies for Illinois, Iowa, Michigan and Ohio. Across these five states, ELPC has identified more than 1,000 clean energy businesses employing over 50,000 people.

For more information on these matters, please call our office at 305 548 5020.

Monday, October 24, 2011

Insurance exchange could ease health care cost for small businesses

By Misty Williams

The Atlanta Journal-Constitution

As co-owner of a small IT solutions company in Alpharetta, Julie Haley would rather be out networking and snapping up new business instead of spending hours looking for ways to curb her firm's escalating health insurance costs.

Like small businesses across Georgia and the nation, health care costs for Edge Solutions, which Haley started in 2008, have been jumping by double digits. Haley estimates in the first year alone, health care costs made up 25 percent of operating expenses – in part because without at least 10 employees insurers wouldn't even bother talking with her. Instead, she paid pricey continuation coverage of workers' prior plans to attract the experienced people she needed who were used to great benefits at larger companies.

"It really crippled us," she said, adding that the exorbitant cost meant growing the business more slowly.

Some relief could be on the way, however, with the creation of a small business insurance exchange in Georgia that experts say could reduce costs for employers and increase plan options for workers.

A committee of local health care experts, lawmakers and community leaders is exploring ways to develop an exchange -- required starting in 2014 under the federal health care law -- and will deliver final legislative recommendations to the governor by Dec. 15. The group is also looking at an exchange for individuals.

While opposing the health care overhaul, Gov. Nathan Deal appointed the committee earlier this year -- saying it made sense to study Georgia-based solutions while the courts decide whether the law is unconstitutional. The federal government will step in to set up exchanges if states don't.

More options

Statewide, 96 percent of all firms have between two and 100 employees, with less than half offering employment-based insurance, according to a recent report by the committee. Some 39 percent of Georgians whose family head works at a firm with less than 10 employees have employer-based coverage. That compared with nearly 70 percent with coverage at companies with 100-plus workers, the report shows. The majority of small businesses in Georgia that do have benefits offer high-deductible plans, which means greater out-of-pocket costs for workers.

"I think people have become so frustrated with the health insurance marketplace, they are willing to try just about anything if they think it may lead to lower costs," said Kyle Jackson, director of the local chapter of the National Federation of Independent Business.

Small employers face higher insurance premiums because they can't spread risk over a large group and have higher per-member administrative costs.

Nationally, small businesses pay up to 18 percent more than large firms for the same health insurance policy, according to government estimates. From 2000 to 2009, the rate of firms with less than 10 people offering insurance fell from 57 percent to 46 percent. And 11 million of America's uninsured work for businesses with less than 25 workers.

The idea behind state health insurance exchanges is to pool small businesses and their employees with millions of other Americans to increase purchasing power and competition in the market.

Open to businesses with up to 100 workers, exchanges would be designed to allow employers to choose their contribution levels to employee coverage, save money by spreading administrative costs across more companies and offer more plan choices from multiple insurers to fit people's individual needs. All plans would meet federal and state quality standards.

"I think it can take away some of the unpredictability and help give workers and small firms more choice if they want it," said Cindy Zeldin, director of Georgians for a Healthy Future and an exchange committee member.

Law raises worries

Some business owners, however, are skeptical of an exchange, the health care law in general and the new regulations, financial penalties and layers of bureaucracy they could be saddled with.

One big concern is a new fee assessed on insurers – a cost that will be passed on to businesses, Jackson said. The fee will increase annually based on premium growth and could cost insurers $8 billion in 2014, rising to more than $14 billion by 2018, according to America's Health Insurance Plans, a national trade organization.

"That's not going to do anything to bring down rates," he said.

A small business tax credit -- for companies with fewer than 25 workers and an average wage below $50,000 – is helpful but too restrictive to benefit a large group of employers, he said.

Uncertainty surrounding the court battle over the constitutionality of the law is also a worry. Last month, the Obama administration asked the Supreme Court to hear a case regarding the health care law, which could result in a decision by next summer. The local group studying exchanges has a subcommittee looking at how to respond if the whole law or parts of it are struck down.

The uncertainty also is weighing on the job market because business owners are concerned about the impact of the health care overhaul on the cost of hiring employees, said Russ Childers, owner of a small insurance agency in Americus who also serves on the exchange committee.

Companies with at least 50 employees will also face possible penalties for not offering health coverage under the new law.

Those businesses that don't provide benefits will be fined $2,000 a year for all employees beyond the first 30, said Tony Holmes, a partner in the Atlanta office of global consulting firm Mercer. An employer with 100 workers, for example, would pay $140,000.

Even those who do offer coverage could be fined if it's considered unaffordable – more than 9.5 percent of a worker's total family income, Holmes said. If it's too expensive for some employees, those who make up to 400 percent of the federal poverty level will be eligible for the individual exchange and federal tax credits.

Garry Hill, head of the group benefits practice at insurance brokerage Sterling Risk Advisors, said the small businesses he works with already pay closer to $3,000 to $4,000 in health costs per employee.

"I can in theory scrap my health plan, pay the [$2,000] penalty and give my employees a raise and still come out ahead," Hill said.

A big reason for providing benefits is to retain and attract employees, which in this economy isn't an issue, he added. "Most people are just thankful to have a paycheck."

Personal choice

For many small companies with slim margins, the decision of whether to offer health benefits can come down to choosing between having employees or even keeping their doors open, Holmes said. However, businesses with less than 50 workers aren't subject to the same penalties as larger firms under the law.

Trying to keep a cap on expenses as his Marietta firm slowly grows, Brian Mayfield doesn't offer benefits to his two full-time and four part-time employees at Techquidation, which services cash registers and barcode scanning equipment. Mayfield said he may have added one or two employees this year if things weren't so uncertain.

"Everybody I know who owns a business, we're all very cautious right now," he said.

Mayfield said he wouldn't consider a small business insurance exchange, but hopes to someday offer his workers a set amount of money they can apply toward individual plans that work for them – avoiding his exposure to premium hikes at the same time.

"I'm a believer in people being accountable for making their own choices," he said.

For more information on these matters, please call our office at 305 548 5020.

Friday, October 21, 2011

Business Viewpoint: Patent law changes remain controversial

By, Margaret Milkin

The new America Invents Act affects U.S. patent laws more extensively than any other in the past 60 years.

The most controversial provision of the act — passed by Congress and signed by President Barack Obama on Sept. 16 — significantly models the U.S. patent system after Europe's by awarding patents to the first inventor to file an application rather than to the first person to invent the technology.

This new law radically alters patent rights, particularly for small businesses and individuals who typically lack resources to rush to the patent office.

Although some tout the law as enabling applicants to obtain patents faster, others predict the fallout will be harmful to small inventors.

In an effort to balance these concerns, the new law orders government lawyers to conduct a study (at taxpayer expense) to gauge the effects on small inventors occasioned by awarding patents to the first inventor to file rather than to the first person to invent, and to assess whether this system "creates, mitigates or exacerbates" disadvantages to obtaining patents by small entities. These government agencies must complete the study within the next 12 months; however, the new patent filing system takes effect in 18 months.

Even though there will be no direct U.S. data for the government study, we can look to Canada for insights on the effects of the conversion.

An empirical study, conducted by professors at the University of Pennsylvania Law School, predicts a negative outcome based on data collected from the Canadian patent office following Canada's conversion to the European-style, first-tofile system.

The study showed that the numbers of patents granted to small inventors dropped significantly in the 20 years following Canada's implementation of its first-to-file system. It concludes that the first-to- file conversion in the U.S. likely will yield fewer patents issued to individuals and small businesses, and will diminish patent quality as inventors sprint to the patent office with minimal technological descriptions based on early prototypes.

The first-to-file provision will affect other aspects of U.S. patent law, including the definition of "prior art" that would invalidate patents.

Large conglomerates tend to support the first-to-file system because they believe it will simplify ownership disputes and they can bear the expense of early and frequent patent filings. Other companies strongly oppose the provision as harmful to American innovation.

Small inventors and businesses tend to oppose the first-to-file system, saying it stacks the deck against them because they have fewer resources to compete in the race to the patent office.

Interestingly, a survey of patent practitioners shows that those in the business of obtaining patents largely oppose the patent provisions in the new law.

Likewise, these patent practitioners reject the claim that the law will create many new jobs, as proponents maintain, except for the lawyers who will spend the next decade litigating the meaning of the law.

The lawyers win again!

For more information on these matters, please call our office at 305 548 5020.

Thursday, October 20, 2011

Business Owners Criticize Proposed Accessory Use Law at Public Hearing

Many local business and vineyard owners condemned the proposed law to limit accessory use; Supervisor Walter says the town will go "back to the drawing board."

By Paul Squire

Two proposed laws that would change the Town Code to limit "accessory-use" buildings for local businesses and redefine agricultural production businesses were heavily criticized by business owners, who called the laws "redundant" and potentially "catastrophic" at a public hearing at the Town Board's meeting on Tuesday night.

By the end of the public hearing, Supervisor Sean Walter and several board members seemed to agree the law would have to be altered or scrapped.

"We'll have to go back to the drawing board on this one," Walter said.

The laws, which would both alter Chapter 108, Article 1 of the town code, were drafted in response to a recent Zoning Board of Appeals decision that would allow the owner of a proposed antique shop on Route 25 in Aquebogue to build a wine-tasting room adjacent to the shop.

The first change would alter the language in the Town Code to define accessory use structures as smaller in size and purpose than the "primary use" structures on a business property.

However, this law was met with fierce opposition. Sal Diliberto, owner of Diliberto Vineyard and Winery in Jamesport, argued against the law, saying it was too prohibitive.

"We're a very heavily regulated industry," Diliberto said of wine-makers, "[This would] open a box of worms." He added that a provision in the State Liquor Authority would already prevent the antique shop from getting a liquor license. Diliberto also said the proposal to redefine an agricultural production business placed too many limits on farmers. Councilwoman Jodi Giglio said the Town Board was working on removing parts of the Town Code that set a seven-acre minimum limit on farmland.

He also pointed out that the change in Town Code would remove language that had been used in legal cases and other parts of the Town Code, requiring an overhaul of all sections of the code that used that definition.

Other business owners, such as manufacturers in the Enterprise Park at Calverton, were concerned the new definition of "accessory use" would make their storage facilities illegal.

Peter Day, representing Stony Brook Manufacturing, said the proposal would "be catastrophic to our business." In an open letter from his company, Day argued that the language about the size of accessory-use areas would make outdoor storage illegal for businesses like Stony Brook Manufacturing.

Day added that the business owner was in Florida looking for a place to distribute his goods, and would begin to look for factory space to move his business to Florida if the law was passed.

One of the few voices of dissent was Dominique Mendez, co-founder of the Riverhead Neighborhood Preservation Coalition, who said that the loopholes about what constitutes accessory use should be closed. She urged the town to fix the language of the code to exclude specific accessory uses deemed unsuitable or unwanted.

Supervisor Sean Walter said that after hearing the complainants' remarks, he agreed the law would need to be dropped or at the very least rethought.

"This is why we have public hearings," he said.

Not all on the Town Board agreed. After the hearing Councilman George Gabrielsen said he was not convinced that the owners of the proposed wine-tasting room/antique shop wouldn't be able to find a way to get a liquor license, and hoped the Town Board would still be able to define acceptable and unacceptable accessory uses.

For more information on these matters, please call our office at 305 548 5020.

Tuesday, October 18, 2011

New California law bars E-Verify requirement for employers

The measure has upset activists against illegal immigration who got some cities to require that businesses check the legal status of workers.

For years, activists against illegal immigration pushed cities across California to adopt ordinances ordering businesses to verify that their employees were eligible to work in the U.S.

Several cities, including Temecula, Murrieta and Lake Elsinore, complied and required businesses to enroll in E-Verify, an online program that uses federal databases to check the immigration status of workers. Those that refused could face fines or revocation of their business licenses.

But those victories appear to have been wiped out this month with legislation signed into law that prohibits the state, cities and counties from mandating that private employers use E-Verify.

"It's very disappointing when you spend all the time, you go to your elected representatives and you get them to do something, and then at the higher level they squash you," said Ted Wegener, founder of the Inland Empire-based Conservative Activists. The group pushed for E-Verify ordinances in Riverside, San Bernardino and Orange counties.

Cities that adopted such rules are now preparing to comply with the new state law.

"Norco is simply going to repeal their ordinance," City Atty. John Harper said. "I don't think there's any other choice in there."

Harper and city officials in Temecula and Murrieta said that no businesses had been cited or had their business licenses revoked. Murrieta, which late last year adopted its E-Verify ordinance under pressure from residents, allowed people to file complaints if they believed a business was hiring undocumented workers.

But Brian Ambrose, a senior analyst in the city manager's office, said, "We have not received a single phone call…. We did not believe there was ever a problem with illegal immigration here in Murrieta."

In San Juan Capistrano, which mandated the use of the program for some contractors, officials said the new law would require only a minor adjustment to remove the E-Verify requirement from contracts.

Those who sought the state law in reaction to the growing number of localities adopting mandatory E-Verify rules said such moves were a distraction from a larger problem.

"As a nation, we are in such desperate need of immigration reform," said Sara Sadhwani, strategy director for the California Immigrant Policy Center. "While a handful of cities in California and a handful of states across the country have moved to mandate the use of this kind of program, it's very misguided."

The state ban received broad support, including the California Chamber of Commerce and the California Farm Bureau Federation, which questioned the accuracy of the databases used by the federal system.

Assemblyman Paul Fong (D-Sunnyvale), who introduced the bill, said he felt that mandatory E-Verify was an unnecessary burden on businesses.

"It was costly, time-consuming. It's unfair for big businesses and definitely for small businesses," he said. "Why make a flawed system mandatory?"

Fong said the system often misidentifies U.S. citizens and legal immigrants. One such worker is Jessica St. Pierre, 22, who said she was fired from her job at a telecommunications company because her name was not correctly entered into the E-Verify system. It took her four months to get another job.

"I don't see it as being a help, but a burden for people that live here," St. Pierre said. "This system here is just not up to par in what it's supposed to be doing, so why have it?"

For Wegener of Conservative Activists, the battle now shifts to the federal level, where Congress is considering a measure proposed by Rep. Lamar Smith (R-Texas), and co-sponsored by Rep. Elton Gallegly (R-Simi Valley) and others, that would make a system like E-Verify mandatory for all employers.

Wegener said that while he's heard some talk of challenging the state law in court, he doubts many cities will do so.

"Right now, most of the cities are pretty strapped for money," he said. "So taking on an additional lawsuit? I don't think most of the cities will."

For more information on these matters, please call our office at 305 548 5020.

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Monday, October 17, 2011

Bribery law breaches can cost U.S. firms dearly

By, Matt Dunning

As global expansion among mid-market companies and the federal government's enforcement of the Foreign Corrupt Practices Act trend upwards, experts say now is the time for executives and their employees to educate themselves on the law's finer points.

Enacted in 1977 to combat bribery among U.S. companies doing business overseas, the law essentially prohibits firms and their representatives from paying any operative of a foreign government in exchange for contracts, unfair business advantages or other considerations.

The U.S. Department of Justice's enforcement of the law has increased 300% in the past 10 years, rising to 24 such enforcement actions in 2010. The U.S. Chamber of Commerce has made it a high priority to try to win changes in the law. Other business groups also have criticized on the law saying it puts U.S. companies at a competitive disadvantage in markets where bribery or other conduct prohibited by the law is customary.

While publicly traded companies are held to a stricter standard—including bookkeeping and internal control documentation—experts said smaller and midsize private companies and nonprofits should expect just as much scrutiny from federal regulators as their larger counterparts.

Criminal penalties for violation of the FCPA can carry fines of up to $2 million for companies and $100,000 for individuals—not to mention jail time—or, under the Alternative Fines Act, up to twice the cash value of the benefit sought in making the bribe or other corrupt payment. The government also can impose civil fines of up $10,000 per employee convicted of violating the anti-bribery law.

Beyond fines, companies risk forfeiting their right to bid for U.S. government contracts, suspension or revocation of their export licenses, as well as possible external civil litigation for damages under other federal or state laws. For example, a company alleging that bribery led to a competitor winning a foreign contract could sue for damages under the Racketeer Influenced and Corrupt Organizations Act, according to the Justice Department.

Though 88% of corporate FCPA violations filed since 2008 have been brought against publicly traded companies, roughly 78% of individuals charged have been representatives and/or employees of privately held companies.

"Private companies have to take this law seriously," said Coleen Freil Middleton, of counsel at Wilson Elser Moskowitz Edelman & Dicker L.L.P. in White Plains, N.Y. "It's complicated and there's a lot to it."

Without an in-house compliance program (see Proactive FCPA compliance program essential), mid-market companies could run afoul of the FCPA in several scenarios.

Experts say it is important for mid-market companies to know that the Justice Department's definition of a foreign official includes direct employees of the local government, as well as employees of wholly or partially government-owned companies.

Especially in countries such as China, Russia and India—where governments have more minority or controlling stakes in private firms—U.S. companies run the risk of unwittingly making improper payments to a de facto government official when they thought they were interacting with a private executive, experts said.

FCPA violations can occur even if not one dollar was paid directly to a foreign official.

While it is permissible for a U.S. company to cover certain costs of doing business—travel expenses for on-site demonstrations, utility payments, clerical and other locally sanctioned administrative fees, those expenditures are allowed only for "routine governmental action," according to Justice Department publications. Excessive expenses, such as lavish hotel rooms, pricey meals or other gifts, are likely to be interpreted as an attempt to curry undue favor, experts said.

Mid-market companies also should recognize that the law applies not only to direct employees but also to business and trading partners, agents, emissaries or any other third party representing its interests abroad. A company could draw a FCPA violation even if it were unaware of the third party's illegal action in securing a business contract, retaining a contract or facilitating business. Similarly, the FCPA prohibits improper payments to third parties representing a foreign official when the U.S. company or one of its intermediaries knows that all or a portion of the payment eventually will land with the official.

"You might rightfully believe that you can control your own enterprise; but when you also need to control the actions of third parties with which you're doing business, that becomes a much tougher task," said Ann Longmore, executive vp at Willis North America in New York. "Smaller and midsized companies are clearly at a disadvantage here, and might actually be more exposed to FCPA violations than larger companies, because they have fewer resources and are less likely to have people on the ground abroad that could foresee or prevent these kinds of actions."

When evaluating the risks of international commerce, a key step that mid-market companies often overlook, experts said, is evaluating a target market's local traditions and laws with the FCPA in mind. Many regions of the world, and particularly emerging markets, treat payments that the Justice Department likely would construe as bribery as a matter of etiquette or even necessity in the course of doing business.

"Frankly, one of the biggest risks a company can take is failing to familiarize yourself with the culture, the language and the rules in the countries in which you're doing business," Ms. Middleton said. "You do so at your own peril."

Conversely, most industrialized foreign states have their own laws governing international trade to which a U.S. company could be held accountable.

The recently updated U.K. Bribery Act should be a particular focus for mid-market companies in that it applies to a significantly wider range of circumstances. Under that law, enacted July 1, penalties can be applied to any company with direct or indirect dealings with a British entity. That means U.S. companies could find themselves in violation the U.K. and U.S. anti-bribery laws for the same act. Additionally, the U.K. law prohibits payments to private companies and their executives just as it does payments to government officials.

"The U.K. act is essentially our FCPA laws on steroids," said Dana Kopper, senior vp and director at Lockton Cos. L.L.C. in Los Angeles "You're pulling in your whole supply chain and the vast array of your external business relationships with third parties, and in doing so, you risk running into issues that you could be totally ignorant of but, under the U.K. law, you are at least partially culpable."

Fines against an individual employee or representative for an unintentional act likely would be covered by directors and officers insurance, experts say.

But coverage for fines against the corporation itself, regardless of the nature of the violation, would be much harder to get, specifically for mid-market companies.

It also is possible that an individual's D&O coverage would be exhausted by investigation and litigation costs before a fine is levied.

For more information on these matters, please call our office at 304 548 5020.

Friday, October 14, 2011

Industry waits for new condominium law

A condominium law was discussed in the Union Hluttaw on October 5 after being submitted by U Zawki Ahmad/U Aung Zaw Win of Maungtaw Constituency the previous day, as reported by the state run newspaper, New Light of Myanmar.

The law is intended to regulate the construction and management of the fast developing high-rise and condominium sector in Myanmar.

Industry sources have described the proposal as a significant step towards ensuring higher quality buildings in a sector that has already been growing for a decade.

U Ko Ko Lay, director of Three Friends Construction said the law would help build better condominiums in the industry.

"This has great potential to come out with real standards for condominiums in the industry so buyers can get what they pay for," he said.

The upcoming law will provide a definition of a condo, thereby easing disputes between condo builders and owners, said U Ko Ko Lay.

A spokesperson of a construction firm based in Mingalar Taung Nyunt, who asked not to be named, felt that the introduction of a law would have an industry wide impact on construction standards, while a developer based in downtown Yangon said that establishing a condominium law would create a more favourable climate for the industry.

"In my opinion, this proposed law will enforce construction of more quality condominiums and also set particular norms and standards," he said.

Condominium residents also welcome the proposed law, helping to protect them against unscrupulous developers.

"The introduction of a condo law will help restrict some developers from operating outside regulation," said U Sat Han Kyi, a condominium resident in Bahan township.

"It would provide a way to avoid condominiums opening without a Building Completion Certificate (BCC) as well," he said.

U Sat Han Kyi was keen to stress that while it was a welcome step, it was already long overdue as many issues currently plague the sector.

"We largely expected the introduction of a condo law at some point. Actually it should have come ten years ago," he said.

"Land ownership, parking problems, facilities and project delays can be solved by the law."

The law could also potentially benefit financing and ownership issues.

"As far as I know, if the condo law were to exist, we can hopefully get bank loans which would increase the demand for condominiums through instalment purchase that benefits both bankers and property owners," he said.

The developer from downtown echoed the sentiment for improved financial access due to the law.

"I personally hope that banks will be able to accept mortgages on condos with a stronger law to back it up," he said.

It would also provide more systematic procedures in buying and selling, and so benefit buyers, sellers and developers, he said.

"It can bring stronger guarantees for proper ownership and improve the climate for investors with strict discipline and regulations.

"All this could spark interest for condo buyers, pushing up the demand and price of those properties," he said.

The spokesperson from Mingalar Taung Nyunt construction firm was more bullish on the changes it would have on the market, saying that ownership of condos and apartments will make the sector stronger than before as owners could get bank loans for fixed assets that would help improve business opportunities.

"Apartment and condominium buyers would be able to get a stronger guarantee of ownership."

He predicted that the condominium law would also include provisions for foreigners to buy a condominium or apartment as well.

"I heard that the law could allow foreigners to purchase apartments but not land. This opportunity would surely attract further foreign direct investment in the industry," he said.

A change to foreign ownership could well give the industry an additional jump, but until details of the law are released, U Ko Ko Lay was keen to emphasise a degree of caution.

"The condo market will expand further if the law can figure out condo ownership by foreigners, as it is in other countries. But we have to wait and see what the law will exactly say on this."

For more information on these matters, please call our office at 305 548 5020.